Monday, 23 June 2014

Song for Quindell

(Here's the tune if you didn't get it)

Quindell, a sell
These are words that go together well
Quindell, a sell

Quindell, une vente
Sont les mots qui vont tres bien ensemble
Tres bien ensemble

I held you, I held you, I held you
As a Full List play
Until they said no way
UKLA said you'd changed too fast
What didn't you understand?

Quindell, une vente
Sont les mots qui vont tres bien ensemble
Tres bien ensemble

I read the, I read the, I read the
I read the RNS
Oh, what a mess
Until you learn to read the rules
Your statements won't impress

I want you, I want you, I want you
To check my hearing loss
At a nine grand cost
Until you do I'm mis-hearing you
What was that you said?

Quindell, une vente
Sont les mots qui vont tres bien ensemble
Tres bien ensemble

I will say the only words I know
That you'll understand, my Quindell

With apologies to the Beatles

Friday, 11 April 2014

Are you buying value, quality or a story? Value Investing panel at UK Investor Show 2014

Bulletin Board favourites are mostly story stocks with poor quality and value ratios

Click to enlarge
The ever-smooth Ed Croft blew bubbles on the screen. Are Stockpedia's Quality Rank and Value Rank the
solution to our tendency to buy a great story stock, most of which will disappoint?
Addressing us in the old-fashioned way without a projector were investors Nigel Wray, Chris Bailey and
Paul Kavanagh of Killik & Co.

To kick off, Croft asserted that evidence is clear that, however you measure it, over the long term (4

  • cheap stocks beat expensive stocks and 
  • quality stocks out-perform junk stocks

Cheap means low PE, low PBV, low PCF or some combination.
Quality indicators are companies with strong franchise, positive earnings direction and low risk. ROCE is a strong quantitative measure.

Use Croft's interactive webpage. Click the Top Bulletin Boards button above the bubble chart.

Wray agreed about the out-performance and pointed out a further advantage of shares that generate good long term returns: the longer you hold a successful pick, the better the return if you are a capital gains tax (CGT) payer. The magic of compounding means that deferring the CGT hugely improves the final post-tax value compared to jumping in and out of positions and realising profit every year.

Why do people buy shares whose numbers show them to be expensive or poor quality?

Investors love a good story, promising outsized returns. I would add that 'doing the numbers' is not on everyone's checklist and in any case, once enthused, confirmation bias means we humans are willing to give good stories a lot of slack when it comes to balance sheets, tangible assets and real hard cash coming in.
Croft is not saying avoid all story stocks, just that they need more justification than quality-value ones. And judging a story is a lot harder than looking for booby traps under an otherwise good-value quality-brand car.
I've seen many AIM promotions, particularly mining and oil companies, that entirely rely on CEO charm, an exciting sounding potential resource (that is often a cast-off that cost them a tenner) and the difficulty of evaluating the risks, timescale and costs of development into production. The latter is called information asymmetry. Unethical directors will manipulate you as much as they legally can (and more) and it is your arch enemy.

Kavanagh did admit to picking some oil exploration shares "But it's lottery ticket type money."

Monday, 7 April 2014

Blinkx: Ben Edelman is Not backing Down

"It's the Wild West out there, and Ben is the sheriff" - Alvin Roth, Economist
The UK Investor Show on 5 April scored a coup in getting Ben "Web Sheriff" Edelman to show his latest findings on blinkx. Edelman is an associate professor at Harvard, lectures on the online economy and has a law degree. Ben and blinkx are having a shoot-out which started in January with Edelman's blog The Darker Side of Blinkx.

In a sometimes very technical piece, he accused blinkx of being party to deceptive practices involving web adverts and pop-up windows in which blinkx got paid when users clicked the ads or closed the pop-ups. Blinkx strongly refuted this but without any detail which surprised many market commentators.

Two months later Blink issued a detailed counter to Edelman. Blinkx also sent a lawyer to the UK Investment Show but declined an offer of a ten minute slot on stage and an exhibition stand.

Edelman admits to, indeed revels, in being a geek with an obsession for nailing what he views as people abusing the web for undeserved profit. The extreme depersonalisation and literal distancing of  business transactions by web and email leads him to say that "In some respects the Internet is the best machine ever made for swindling people."
He is especially exercised by adware: programs running in the background on a PC that causes
unwanted adverts to be displayed. He has developed automatic methods to capture and trace some of these companies that are spoiling our browsing and pinching pennies or even dollars on every click.

Click to enlarge slides
Edelman sounds and frankly looks in his blog pic (right) like a nerdy computer dullard who rarely exposes himself to sunlight, but I was pleased to find this is far from the case. On stage he was energised, confident and witty, which is just as well as much of his case is pretty technical. As he bounded about the stage explaining his slides it was clear that he loves
the challenge of bringing the hot breath of justice down on these modern age cheats.
He soon presented some new research on blinkx that his obedient and dilligent robot PC servants have
found. To boil it down, he makes two key allegations:
  • blinkx's affiliates or sub-affiliates con people into installing blinkx adware on their computers
  • blinkx breaches the US regulator's (FTC) rules by not doing enough to stop those affiliates or sub-affiliates from doing so
The blinkx adware does not say it's by blinkx. This is a deduction Edelman has made. The FTC requires that an adware program creator should know if there is widespread failure by affiliates or sub-affiliates to provide adequate notice of their adware installation and obtain consumer consent to its installation.

Disclaimer: I do not have enough expertise to judge whether Edelman's claims about blinkx are true, I am merely reporting what he said.
Slides reproduced with permission.

Other articles on Edelman's talk:

Doc Layman
Would I rather be long or short of blinkx? Dunno! - Tom Winnifrith (registration req)
Impressions of a self-publicist, and Blinkx - Roger Lawson, ShareSoc
View following the UK Investor Show - Steve Moore (reg req'd)
Telephone interview with Edelman - Doc Holiday
Edelman critics continuing to play ‘the man’, as the PR machine struggles to play ‘the ball’ - Steve Moore (reg req'd)

The best quotes from the UK Investor Show 2014

The first in a series of pieces on Tom Winnifrith's UK Investor Show, held on 5 April.


Quoted are:

  • Ben Edelman AKA The Web Sheriff, Harvard associate professor
  • Terry Smith, fund manager, CEO of Tullett Prebon and exposer of investment rip-offs
  • Ed Croft, co-founder of Stockopedia. Damn good looking for an investment geek.
  • Roger Lawson, Deputy Chairman of ShareSoc
  • David Lenigas, Executive Chairman of Leni Gas & Oil
  • Simon Cawkwell AKA Evil Knievil. Has he lost weight?
  • Cathal Friel, Chairman of Fastnet Oil & Gas. Fast-talking Irish charmer.
  • Paul Scott, AKA Paulypilot, Stockopedia writer and activist. A legend.
  • Clem Chambers, CEO of advfn & market commentator. Writes thrillers.
  • Dominic Frisby, actor, comedian & financial journalist. Like Auric Goldfinger, he loves gold.
  • Vin Murria, CEO of Advanced Computer Software Group (sorry about the pic Vin)

Tuesday, 22 October 2013

Apple iPad5 feature brainstorm

New (new (new)) iPad launched today but will it have a Wow feature?

We never got 3D, haptic display, keyboard cover or a bezel-less screen that pundits have previously predicted. Maybe this time. But what about some really radical advances?

Here's my brain storm.
Vote at the top right of this page.
PS the Widescreen option is there for laughs and is Not Going To Happen.

Folds in half

Not a half-assed effort like the Sony tablet P (right) where you still have a bezel and an air gap between the two
LCDs. Can Apple get the LCD to to right to the edge of a case and but up against a mirror half? 

No connector - wireless charging & video

The change from the old iPhone connector to Thunderbolt caused plenty of anguish. What if there was no connector at all? Nokia and Google mobiles already have optional contactless charging. Samsung offers wireless video streaming.

Micro airbags for drop protection

Built into the corners. Imagine how much Apple stores would charge to replace them!

Shaped like Steve Jobs' head

The ultimate memorial and tribute to The Creator.

Eye-tracking cursor

Gaze-tracking is a hot research area. Samsung's partial effort on the Galaxy 4 hasn't been a hit. Pin-point accuracy probably isn't achievable yet.

16x zoom camera

It is very difficult to get the folded optical path needed for such a large zoom into a 9mm case. When will we be released from the horror of digital-zoom?


The battery is the obstacle here. The electronics could already hide behind the current thick bezel.

AC pins for direct mains charging

Spring-loaded US-style AC pins could mechanically fit in the case. There may be regulatory/safety reasons to prevent this. Hanging your iPad from a mains socket with non-latching pins would not be a winner with the cack-handed either.

Full screen solar panel

Can be done as an MIT project has demonstrated. Ingeniously they avoid the problem of impeding screen brightness by capturing only non-visible photons.

Hybrid always-on e-ink/LCD display

Apple are already thinking about this.

Tuesday, 9 July 2013

Looking for Ten-Baggers is a Losing Strategy: You are not Peter Lynch

7 reasons why these 8 10-bagger picks have lost 42% in 3 years

"One of the most damaging concepts in investing has come out of one of the best books"
This is how I began my first ever investment article. I got a freelance spot on the Motley Fool UK in 2006 and, being a big-head, used it to attack one of the most popular ideas among small investors. I have listened with my head in my hands as friends have told me about their latest share buy, a 95% chance of failure punt wrapped in a great story.
Peter Lynch's idea, buying into a long-term growth company at an early stage, is a great one. There are 24,000 hits on Google for the phrase. How can such a good and popular idea be so damaging?
  1. You are not Peter Lynch
  2. Promoters of shares make them sound way better than they are
  3. Journalists prefer exciting stories over solid but dull firms
  4. Most journalists are writers, not investors
  5. Survivorship bias and prominence bias conspire to make you think exceptional growth companies are commonplace
  6. Misplaced faith in efficient markets - you are probably paying more than a fair price for the supposed next Coca-Cola
  7. You may be diluted many times over in fundraisings - it's like a negative dividend

Eight potential ten-baggers from three years ago

I came back to this hobby horse because of a glitch on Investors Chronicle's website. They re-published an article from three years ago but gave it last Friday's date. Tomorrow's 10-baggers chooses eight shares that could ten-bag. The article is gone from the site but here's Google's cache of it. 
"The next blockbuster is just around the corner, you just have to look out for the signs – a niche but valuable product, a genuine growth market, or a recovery about to kick-start. Tomorrow's 10-baggers have already started their journey, you just have to hitch the right ride."
That sounds so straightforward. How have these potential portfolio-makers done?

Buy price
price now
Firestone Diamonds

MDM Engineering

Falkland Oil & Gas

Faroe Petroleum


Ocean Power Technologies
(only NASDAQ now)




FTSE Smallcap


Not a single share has even two-bagged in three years. The best one, Monitise, is a very good company, in a great sector. Its turnover is up 1250% in three years. But it's losing more money than ever and fundraisings have nearly trebled the number of shares in issue
"Not a single share has even two-bagged in three years."
£1000 put into a portfolio of these shares would now be worth £520. £1000 in the closest index, the FTSE Smallcap, would be worth £1420 or 145% more.

[Edit] A comment here on this article points out that eight shares over three years does not prove anything. This is quite right. You'd need something like 100 over ten years to start getting a statistically significant result. It's a massive problem with learning to invest compared to say tennis, where the feedback is significant and immediate.

Tuesday, 2 July 2013

A Modest Proposal #1: Recapitalise UK with Good Gov't / Bad Gov't split

If it's good enough for banks it's good enough for Government

The Gov't has appointed Rothchild to advise on splitting problem bank RBS into a Good Bank and Bad Bank (report). The idea is to speed the recovery of the useful parts (mortgages, business lending etc) by shoving the toxic loans and some matching debt into a sack to rot and fester at the end of the garden.
Bondholders are concerned that they might have a haircut forced on them if they wake up on the wrong side of the sackcloth. It may seem unjust for the bonds, which rank ahead of preference shares, Gov't B shares and ordinary shares, to suffer a loss when the bank is solvent and whose equity still has a value of £30bn. Always remember that, when in a tight spot, the politicians' expediency card trumps all.

If bondholders in a solvent bank can be burned, why stop there? Britain is struggling to recover under a mountain of state debt, so let's split off the bits we don't want and draw a line under it (© Tony Blair).

Good Gov't / Bad Gov't split

Good Gov't Bad Gov't
Culture, media & sport
Communities & Local Government
£1200bn debt
Home Office
Unfunded liabilities

Holders of Gilts can take an immediate 25% hit and more later if we feel like it.The Good Gov't can move ahead with reviving the economy with plenty of spending on jobs, roads and health. Income tax can be cut to 15%, corporation tax to 12%, making it the lowest in the EU.

A disadvantage of the split is the need for two General Elections, one for each Gov't. Perhaps Gordon Brown and Tony Blair will come back to jointly run the Bad Gov't, tied together like bickering conjoined twins in an uncivil partnership.